Singapore firmly believes in international law and the principles enshrined in the United Nations Charter. All countries, big and small, must have their sovereignty, political independence and territorial integrity respected. Singapore takes any infringement of these essential values very seriously, as they are critical to Singapore’s existence as a small city-state.
In response to Russia’s invasion of Ukraine, the international community has stepped forth in instituting unilateral sanctions against Russia and its related entities and individuals. Singapore, in a surprising move (in my opinion), has also imposed unilateral sanctions against Russia, related institutions and persons.
The Singapore government has implemented financial sanctions against identified Russian banks, businesses, and activities in Russia, as well as fundraising efforts benefiting the Russian government.
Providers of digital payment tokens are now forbidden from enabling transactions that might help in the circumvention of financial controls. All Singaporean financial institutions, including banks, financial businesses, insurers, capital markets intermediaries, securities exchanges, and payment service providers, are subject to these regulations.
Sanctions are “thou shalt not deal” commandments issued by a group of countries (multilateral) or by a particular country (unilateral) against a target country or target entities.
Therefore, businesses domiciled in Singapore conducting business relations or arrangements with Russia should take a step back and conduct an assessment of their business activities to ensure that they are not in contravention (whether directly or indirectly) of the sanctions imposed unilaterally by Singapore on Russia.
In particular, this rings especially true for:
- enterprises that export restricted goods specified to Russia, and
- any company that has business relations with Russian banks or other Russian financial institutions.
Sanctions are utilised to compel the targeted country to modify its behaviour. Its coercive power is driven by its ability to restrict entities and individuals of the sanctioning country from dealing with the sanctioned country (under the threat of criminal and/or civil penalties).
What makes the usage of unilateral sanctions by Singapore a deviation from norm is the fact that the sanctions now imposed are of Singapore’s own actions as opposed to being part of a UN resolution (unilateral as opposed to the usual multilateral type of sanctions pursuant to an UN resolution).
The goal of these sanctions and limitations is to limit Russia’s ability to wage war on Ukraine. Goods and materials that can be directly used as weapons as well as items that can contribute to offensive cyber activities are now subject to export regulations. In light of the foregoing, Singapore has prohibited the transfer to Russia of: (a) all products on the List of Military Goods; and (b) all items on the List of Dual-Use Goods
The Singapore approach
Singapore has put in place two broad sanction regimes.
First, Singapore has prohibited military and dual-use technological items from being exported, transhipped, or transited to Russia.
Second, it has enacted financial sanctions against Russian banks, businesses, and activities in and associated with Russia, as well as fundraising efforts that benefit the Russian government
First set of sanctions:
Singapore has restricted the export and transhipment of certain products, notably those with a direct or indirect military use, under the Strategic Goods (Control) Act 2002 and Strategic Goods (Control) Order 2021.
This implies that it is now illegal to export, tranship, or transit any of the following items to Russia:
- military equipment and related components;
- electronics, which includes general-purpose integrated circuits;
- computers and related equipment with specified characteristics that are prohibited; and
- telecommunications systems, equipment, and components, and accessories that meet certain prescribed criteria.
Second set of sanctions:
Singapore has also implemented financial sanctions restricting the following:
- Entering into transactions or establishing business relationships with designated Russian banks.
- Providing financing or financial services in relation to the export from Singapore or any other jurisdiction of goods subject to Singapore’s export controls on Russia.
- Providing financial services in relation to designated Russian non-bank entities which are involved in activities in (2).
- Entering into transactions or arrangements, or providing financial services that facilitate fundraising by designated governmental and related entities of Russia.
- Entering into transactions or providing financial services in relation to the designated sectors of Donetsk and Luhansk.
- Entering into or facilitating any transactions involving cryptocurrencies, to circumvent any of the above prohibitions in (1) to (6).
It is difficult to predict how long the sanctions will be in place, or whether they will be expanded or reduced in scope. The legal implications have now become crystallised business risks. These risks are no longer theoretical, but real and must be managed. As things remain uncertain, companies have to keep an eye on future developments on the global stage to assess their next move.
Given the global consensus on the legitimacy of the invasion, and subsequent widespread imposition of sanctions across the globe, companies in Singapore need to be aware of the sanctions imposed within and outside of Singapore as well. As such, companies must adopt proactive steps to navigate through this regulatory labyrinth with the right tools and advisors. This is no longer a “good to have”, but has become a “must have” since the usual risks such as financial risk and political, regulatory and legal risks have now come to the forefront.
Saravanan Rathakrishnan is an associate of RHTLaw Asia's Corporate and Capital Markets Practice. Funds, capital markets, mergers and acquisitions are among his areas of expertise. Saravanan is engaged in the startup community, consulting a variety of startups in relation to contract terms, regulatory obligations, legal commitments and corporate structure. He maintains a keen interest in finance, economics, and law and has published a host of legal, economic and finance articles.